Money Laundering – RBI's Indicative List of Suspicious Activities

By Vijay Kumar

Transactions Involving Large Amounts of Cash

1. Exchanging an unusually large amount of small denomination notes for those of higher denomination;

2. Purchasing or selling of foreign currencies in substantial amounts by cash settlement despite the customer having an account with the bank;

3. Frequent withdrawal of large amounts by means of cheques, including traveller's cheques;

4. Frequent withdrawal of large cash amounts that do not appear to be justified by the customer's business activity;

5. Large cash withdrawals from a previously dormant/inactive account, or from an account which has just received an unexpected large credit from abroad;

6. Company transactions, both deposits and withdrawals, that are denominated by unusually large amounts of cash, rather than by way of debits and credits normally associated with the normal commercial operations of the company, e.g. cheques, letters of credit, bills of exchange etc.;

7. Depositing cash by means of numerous credit slips by a customer such that the amount of each deposit is not substantial, but the total of which is substantial.

Transactions that do not make Economic Sense

1. A customer having a large number of accounts with the same bank, with frequent transfers between different accounts;

2. Transactions in which assets are withdrawn immediately after being deposited, unless the customer's business activities furnish a plausible reason for immediate withdrawal.

Activities not consistent with the Customer's Business

1. Corporate accounts where deposits or withdrawals are primarily in cash rather than cheques;

2. Corporate accounts where deposits & withdrawals by cheque/telegraphic transfers/foreign inward remittances/any other means are received from/made to sources apparently unconnected with the corporate business activity/dealings;

3. Unusual applications for DD/ TT /PO against cash;

4. Accounts with large volume of credits through DD/ TT /PO whereas the nature of business does not justify such credits;

5. Retail deposit of many cheques but rare withdrawals for daily operations.

Attempts to avoid Reporting/Record-keeping Requirements

1. A customer who is reluctant to provide information needed for a mandatory report, to have the report filed or to proceed with a transaction after being informed that the report must be filed;

2. Any individual or group that coerces/induces or attempts to coerce/induce a bank employee not to file any reports or any other forms;

3. An account where there are several cash deposits/withdrawals below a specified threshold level to a avoid filing of reports that may be necessary in case of transactions above the threshold level, as the customer intentionally splits the transaction into smaller amounts for the purpose of avoiding the threshold limit;

Unusual Activities

1. An account of a customer who does not reside/have office near the branch even though there are bank branches near his residence/office;

2. A customer who often visits the safe deposit area immediately before making cash deposits, especially deposits just under the threshold level;

3. Funds coming from the list of countries/ centers which are known for money laundering;

Customer who provides Insufficient or Suspicious Information

1. A customer/company who is reluctant to provide complete information regarding the purpose of the business, prior banking relationships, officers or directors, or its locations;

2. A customer/company who is reluctant to reveal details about its activities or to provide financial statements;

3. A customer who has no record of past or present employment but makes frequent large transactions;

Certain Suspicious Funds Transfer Activities

1. Sending or receiving frequent or large volumes of remittances to/from countries outside India ;

2. Receiving large TT /DD remittances from various centers and remitting the consolidated amount to a different account/ center on the same day leaving minimum balance in the account;

3. Maintaining multiple accounts, transferring money among the accounts and using one account as a master account for wire/funds transfer;

Certain Bank Employees arousing Suspicion

1. An employee whose lavish lifestyle cannot be supported by his or her salary.

2. Negligence of employees/ willful blindness is reported repeatedly;

Some examples of suspicious activities/transactions to be monitored by the operating staff-

1. Large Cash Transactions

2. Multiple accounts under the same name

3. Frequently converting large amounts of currency from small to large denomination notes

4. Placing funds in term Deposits and using them as security for more loans

5. Large deposits immediately followed by wire transfers

6. Sudden surge in activity level

7. Same funds being moved repeatedly among several accounts

8. Multiple deposits of money orders, Banker's cheques, drafts of third parties

9. Transactions inconsistent with the purpose of the account

10. Maintaining a low or overdrawn balance with high activity

RBI's RP C D. C O.RRB.No . B C . 77/03.05.33 (E)/2007-08 Dated: June 18, 2008